Course Project one Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors outlined in our book. Be sure to cite any references used. The United States Energy administration’s study of the prices of crude oil determined the main reason for the large fluctuation is because of the prices of crude oil. Supply and worldwide demand have had a major influence on the availability of crude oil which is used to make gasoline. The economic recession in 2008 led to a sharp drop in demand and pricing but since then the economy has gotten better, people are spending more but worldwide economic events have still plagued the prices of crude oil impacting the prices of fuel at the pump. More recently environmental impacts such as hurricanes and war in the Middle East have affected the supply which has also led to an increase in gas prices because crude oil was not as abundant so in turn the price of fuel at the pump rose. In late 2011 prices decreased because of a more stable economy as well as a decrease in demand due to alternative fuel sources and electric vehicles the decrease in price was due to the alternative fuel choices available to consumers. In 2012 gas prices fluctuated widely due to world oil supplies, economic conditions and demand for crude oil. 2012 saw devastating hurricanes and war in large oil producing countries such as Sudan as well as crude oil production platforms in the Gulf. Most recently in 2013 increases in crude oil prices and loss of supply due to refinery shutdowns have made the prices for gas increase at the pump. In our book Core Economics it states the law of demand is the inverse relationship between price and quantity demanded, as prices increase demand decreases and as prices decrease demand increases. The Gasoline fluctuations are a direct reflection to the Law of Demand because prices would increase as demand decreased. You can see that historically there had to have been major shifts in the supply curve both left and right because of global issues impacting the supply of crude oil.
Chapter 3 Question 14…Market equilibrium is achieved when the amount of product consumers are purchasing equals the amount producers are able to sale. It is the place at which supply and demand curves intersect. By studying the demand curve you can predict what will happen when Starbuck introduces their new premium coffee. Demand will rise significantly causing a shift in the demand curve to the right. This shift to the right is along the supply curve causing an increase in quantity supplied and an increase in prices to achieve market equilibrium. Supply can be tracked using the supply curve. If supply of the premium coffes suffers due to a hard freeze in Brazil’s crop which decreases the amount of coffee available the supply curve will now shift to the left causing a rise in equilibrium price and causing a fall in equilibrium output. The lower level of supply of premium coffee will cause the price of that coffee to rise. The demand curve will remain constant but as supplies decrease it causes a shift to the left along that demand curve which lowers quantity supplied but raises the price of coffee.
Chapter 3 Question 15. Using crops for food has an effect on prices because their use becomes something other than consumption by humans and livestock. In order to answer the question of how Biofuel legislation and Arctic freeze affected the prices of food in the United States in 2007 you have to examine the supply levels for the production of both fuel and food as well as the level of economic growth worldwide. Farm prices of commodities